A New Day at the Consumer Financial Protection Bureau

mick mulvaney

There has been much speculation as to what the Trump Administration would make out of the Consumer Financial Protection Bureau, the aggressive financial regulator established under former President Obama. Yesterday brought some clarity, with Acting Director Mick Mulvaney’s all-staff email outlining the new focus of the Bureau.

Mulvaney puts it simply: under his watch, the CFPB will no longer aggressively “push the envelope.” Put another way, the CFPB will faithfully enforce the consumer protection laws as written, but not go beyond that mandate.

The fact this needed to be said is a testament to how out of control things have gotten at the Bureau. The CFPB has become notorious for “pushing the envelope,” such as regulating entities explicitly out of its jurisdiction, or retroactively enforcing statutes that the Bureau had rewritten to prosecute activities that occurred five years prior, as the Bureau tried to do in the case PHH v. CFPB.

Mulvaney made clear that he has “no intention of shutting down the bureau” and that the “law mandates that we enforce consumer-protection laws, and we will continue to do so under my watch.” But he will be making the Bureau more fair, accountable, and data driven. According to the email, the new Bureau will have at least four new priorities:

  • On enforcement, the Bureau will focus on quantifiable and unavoidable harm to the consumer and only pursue lawsuits if that can be found.
  • On regulation, the Bureau will focus on formal rulemaking and less regulatory “dark matter”  and regulation by enforcement.
  • The Bureau will make better use of data to inform its priorities. For example, almost a third of the complaints the CFPB has collected are related to debt collection. Meanwhile, less than one percent is related to prepaid cards and less than 2 percent are related to payday lending.  
  • The Bureau will also be required to conduct more rigorous, quantitative, cost-benefit analysis in conducting rulemakings.

All of these priorities are common sense measures that will lead to more fair and effective consumer protection. CEI has long advocated for such changes, and we welcome the announcement. They are by no means an attempt to undermine the Bureau’s statutory obligations, as Mulvaney made clear, but are being implemented to better fulfill those obligations without the kind of bureaucratic tunnel vision that the CFPB has become notorious for.

Ironically, the kind of common sense reforms that Mulvaney has proposed may help to save the Bureau in the long run. One of the greatest tragedies of the CFPB’s creation was that it was a badly missed opportunity to effectively reform consumer financial protection in the United States. At the time of the Dodd-Frank Act of 2010, which created the CFPB, the system was badly in need of modernization. Yet the Bureau’s structure reflects not that of a data-driven 21st century agency, but one of the notorious, 1970s style command-and-control regulators. The CFPB is cut from the same cloth as agencies that were eventually abolished for their narrow-minded attitude that led to conflicting and incoherent regulatory policy.

Of course, Mulvaney is not altering the structure of the agency, but merely its culture and operations. And while this will go a long way, reforming the Bureau’s structure is still a requirement for Congress. The CFPB’s unconstitutional and unaccountable structure is still a problem, not matter what the political stripe of its director. For exactly how to reform the Bureau, I lay out some ideas for Congress here.

Mulvaney’s intention to reform the Bureau’s culture and operations marks a new day for the Consumer Financial Protection Bureau – where, as Acting Director Mulvaney put it, “the days of aggressively ‘pushing the envelope’ are over.”